This Court, in a case founded on what appear to be unique facts, determined that a decedent's estate, based upon the agreement of the administrator and all beneficiaries, may apply surplus proceeds from the sale of real property to satisfy a deficiency judgment awarded to the surviving spouse for her statutory allowance.

The petitioner who was the administrator of her husband's estate (the "Estate"), applied for her statutory year's allowance as the surviving spouse as provided by N.C.G.S. Section 30-15 which authorizes the surviving spouse of a decedent to claim an allowance "out of the personal property of the deceased spouse. The clerk of superior court entered a deficiency judgment (the "Deficiency Judgment") as there was no personal property left in the Estate to satisfy Petitioner's allowance and Estate. The opinion states further that:

...the only asset available to satisfy the decedent's debts was a tract of real property known as the 'Homeplace,' which was owned by David Mac Giddens in life and passed in equal one-third undivided interests to Petitioner and Respondents on his death. Counsel for the Estate filed a motion to authorize the sale of the Homeplace and, on 28 December 2017, the clerk entered a consent order recognizing an agreement between Petitioner, Respondents, and the Estate to use the proceeds from the sale to "pay the claims of the Estate of David Mac Giddens and the cost of the administration of the estate."

The property was sold and the final report and account that were filed listed $21,568.94 in funds available to "pay claims and costs of the Estate, [the] balance of which will be distributed to the heirs when the Estate is closed, if any[.]" Counsel for the Estate filed a motion with the clerk seeking authorization for the payment of the Deficiency Judgment from those funds, averring that the "$21,568.94 is sufficient to pay all the claims, debts, costs and administration of the Estate, including the [D]eficiency [J]udgment[.]" the respondents opposed the motion which the clerk denied. The opinion states:

The clerk's order cited N.C.G.S. Section 30-18, which provides that the spousal allowance "shall be made in money or other personal property of the deceased spouse[,]" and concluded that it prohibited the use of the surplus sale proceeds to pay the Deficiency Judgment after quoting the following language from Denton v. Tyson, 118 N.C. 542, 24 S.E. 116 (1896):

[T]he widow will not be entitled to any further payment on her year's support out of money arising from the sale of land. And if the land sold should bring more than is sufficient to pay the proper expenditures of the plaintiff in the course of his administration, the residue will remain real estate. 118 N.C. at 544, 24 S.E. at 116. (1896)

The clerk's order did not address whether the parties had otherwise agreed to pay the Deficiency Judgment out of the proceeds from the sale of the Homeplace.

The Estate appealed the clerk's ruling to the superior court, presented additional evidence to the trial court in a de novo hearing and the court entered vacated the clerk's order concluding that the clerk had committed prejudicial error by not considering evidence of an agreement between the parties to use the property sale proceeds "to pay all claims against the Estate, specifically including the [Deficiency J]udgment referenced in Petitioner's motion[.]" The trial court also concluded that the language relied upon by the clerk from Denton was non-binding dicta and that, in any event, Denton was distinguishable. As the hearing was de novo, the court also made new findings of fact based on the additional evidence presented that the parties had expressly agreed to satisfy the Deficiency Judgment with the surplus proceeds from the sale of the property and allowed the motion to pay the Deficiency Judgment out of the property sale proceeds.

The respondents argued in their brief that the prohibition in Denton against using proceeds from the sale of real property for the satisfaction of the Deficiency Judgment accords with the current year's allowance statutes, and the trial court therefore erred in disregarding Denton's holding. However, the opinion cites the fact that the Respondents' principal brief did not challenge the trial court's findings and appellants may not raise new arguments for the first time in their reply briefs. Court of Appeals concluded that the respondents' arguments concerning the validity, effect, and application of the agreement were waived.

The opinion discuses Denton and its application to these facts. In Denton, a widow claimed her allowance and received all of the estate's personal property in partial satisfaction of the allowance. That payment exhausted the personal assets of the estate, so the administrator paid outstanding administration costs and estate debts out of his own pocket and petitioned for the sale of the decedent's real property to recover those costs. The heirs objected, the North Carolina Supreme Court held that the statutory spousal allowance must be paid first and ahead of any creditors that the proceeds from the sale of the real property could be used to repay the administrator but, the widow was not be entitled to any further payment on her year's support out of money arising from the sale of land. "And if the land sold should bring more than is sufficient to pay the proper expenditures of the plaintiff in the course of his administration, the residue will remain real estate."

The Court of Appeals agreed with the trial court that Denton is distinguishable from the facts presented in this case because Denton addresses only the statutory rights of a surviving spouse in receiving payment on her year's allowance; "it does not determine whether heirs may, by agreement, (emphasis added) consent to the use of proceeds from the sale of real estate to pay any deficiency once the estate's other debts have been paid. The opinion observes that the trial court found that the parties expressly agreed to the payment and concluded that such an agreement was enforceable.

In the opinion, the Court of Appeals discusses policy reasons for supporting family agreements:

The law ought to, and does respect such settlements; it does not require that they shall be made in accord with strict rules of law . . . ." Our Superior Courts will exercise their equity jurisdiction to affirm and approve family agreements when fairly and openly made. . . . Family settlements are almost universally approved. In re Will of Pendergrass, 251 N.C. 737, 742-43, 112 S.E.2d 562, 566 (1960) (quoting Tise v. Hicks, 191 N.C. 609, 613, 132 S.E. 560, 562 (1926)).

We observe though in the footnotes the Court alludes to potential challenges that obviously come to mind, but were not properly preserved for appeal. As we noted, the outcome is largely fact and procedurally driven, but the case is a reminder that many of our modern real property issues are often resolved on the basis of nineteenth century common law.